Mobileye exceeds expectations, raises $890m

The $5.31 billion valuation in Mobileye's IPO makes it the fifth largest Israeli company by market cap on Wall Street.

Israeli company Mobileye, which has developed road accident prevention systems based on a camera with artificial vision technology, raised $890 million in its IPO on the New York Stock Exchange yesterday at a company value of $5.31 billion, which was higher than had been estimated. This valuation makes Mobileye the Israeli company with the fifth highest market cap on Wall Street. The offering included an offer for sale by existing shareholders. The company's ticker symbol is MBLY.

Late bloomers

Mobileye differs from the success stories of other Israeli high-tech companies, such as Check Point Software Technologies Ltd. (Nasdaq: CHKP) and Wix.com Ltd. (Nasdaq: WIX). In addition to the fact that it is not a new company (15 years is a long time in the world of technology), its two founders (and biggest private beneficiaries from its success) do not exactly conform to the mold of high tech entrepreneurs. They have not been in high tech all of their working life, nor are they in their 20s or 30s. Company chairman and CTO Prof. Amnon Shashua is a 54 year-old academic, and his cofounder, president and CEO Ziv Aviram (55) was a retailer before hooking up with Shashua (he managed the Keter Publishing House Ltd. (TASE: KETR), Gali, and Attractions chains). You could describe them as late bloomers.

Shashua, until recently a professor of computer science at Hebrew University, started batting around the idea of Mobileye (where else?) at the university. He studied at ORT Technicom High School in Givatayim, and earned a BS in mathematics and computer science at Tel Aviv University when he was 25. Four years later, at the age of 30, he got his MS in the same subjects from Weizmann Institute of Science. He did his PhD at MIT in the US, and his post-doctorate at that institution's prestigious Center for Biological and Computational Learning.

The idea for Mobileye came to him when he was at MIT. He says that during his doctorate studies, he got one of his lecturers all fired up about the idea of generating a new image from various angles on the basis of three existing photographs. The professor paid for registering the patent, and the two of them managed to sell the technology to a Japanese investor, who happened to be looking for camera-based solution for prevent road accidents.

Shashua did not stop there; in 1995, while working as a senior lecturer in the Technion Israel Institute of Technology Computer Science Department, he converted his idea into his first startup, CogniTens, which developed vision and measuring systems for quality control in the auto and aerospace industries. The company failed, however, and was sold to Swedish company Hexagon in 2007 for $20 million (less than the amount invested in it).

In his vain effort to make CogniTens a success, Shashua devised the original idea of Mobileye after meeting up with Aviram, who advised him on CogniTens. Aviram, who holds a BA in Industrial Engineering and Management from Ben-Gurion University, said in a 2005 "Globes" interview, "We'll consider an IPO in 2006, depending on our sales success and the state of the financial market. We don't need cash, and we're not going to do another financing round."

Actually, Mobileye has raised money since then (a lot of it), and had to wait another eight years before becoming a public company. Waiting paid off, however: the IPO will make Shashua and Aviram multi-millionaires, and not just on paper, either. Each of them is expected to sell shares worth an average of $41 million as part of the IPO, leaving him with an average total capital of $420 million (NIS 1.4 billion). Mobileye is actually Shashua and Aviram's first (very) successful business venture.

Aviram set forth his vision during that interview, claiming, "15 years from now, we won't have to drive. It's starting with accessory system for drivers, and at the end of the process will take over control of the entire vehicle. Just as we couldn't imagine a few decades ago driving a car with no manually operated gears, we find it hard to imagine now driving a car capable of maneuvering between lanes. It's a process that will take time, but it will come." Indeed, Aviram was not just imagining things. Google's driver-less cars are already here, and who knows: maybe today's driving instructors will be out of a job in another five years.

Mobileye's warning system consists of an eyepiece installed under the car's rearview mirror. The system issues warning sounds of possible dangerous situations, such as straying out of the car's lane, tailgating the car in front, and the proximity of pedestrians and bicycle riders. The company's solution is a combination of hardware and software, but it is not the only fish in the sea; it is reasonable to assume that the number of players in this market will only increase.

In the summer of 2012, Mobileye sued a young Israeli technology company, iOnRoad, which developed a free application that does about the same thing as Mobileye's application. Mobileye claimed in its lawsuit that iOnRoad had violated one or another of its patents, and mainly attacked iOnRoad's marketing strategy for saying that its application had the same capabilities as those of Mobileye.

Mobileye is Tier 2 in the auto industry food chain. It sells its chip to Tier 1 equipment manufacturers, which sell its system to auto manufacturers, such as General Motors, Nisan, Renault, and also Tesla Motors. The company sold 1.4 million chips last year, with General Motors being its largest customer. From the date of its founding until now, Mobileye's system has been installed in 3.3 million vehicles. The company sells to 20 auto manufacturers.

"Our vision, your safety," the company claims in its publicity. Now it remains to be seen what safety the Mobileye share will give those buying it tonight.